This week, market research firm IRI Group has announced the results of their research shows that 54% of products sold by the supermarkets and major retailers were on promotions such as ‘multi-buys’ and Special Offer promotions.

This compares with 28% in Europe overall, making the UK the country with the highest number of promotions in Europe. The impact for manufacturers is immense, as the promotions are no longer having the big impact on sales they once had, and the manufacturer is no longer seeing the uplift on promotions that are subsidised at the retailers. That combined with the misleading promotions means that something has to be done to tackle this problem, perhaps by introducing a cap or percentage of products that can be promoted by a retailer or supermarket on promotion.

So how does this fair in the wholesale sector?

The wholesalers all have their own ‘Special Offers’ for the week and also for the month and these are usually the most popular products to help bring the customers in through the door with seasonal variations. So soft drinks may be on ‘Special Offer’ in the summer, and alcoholic drinks in the winter close to the Christmas period. This product range is usually limited and no more than 10% of the range of products the wholesaler will sell.

Most wholesalers also feature a ‘multi-buy’ offer where if you’re buying 2, 3 or 4 products then you will receive a discounted price. This is prevalent and a ‘multi-buy’ is available on almost all products. Indeed, Start Catering and JJs Food Service offer a ‘multi-buy’ on more than 80% of their product range.

With our analytics software, a wholesaler can keep track of the ‘Special Offers’ and ‘multi-buy’ prices charged by competitors and so that they can time their own ‘Special Offers’ accordingly.

We will be looking in more detail at the ‘Special Offers’ and ‘multi-buys’ offered to customers to see if these really work and will report back with our findings!

It’s been no secret that there’s a price war going on at the moment between the major supermarkets due to the attack from the discounters. This may be good news for consumers, with lower prices in store and deflation of food and drink prices, but not so good news for the food producers.

Research from Moore Stephens has shown that 146 food producers went into administration this year, compared to 114 last year, which is a worrying sign.

With the supermarkets putting added pressure on supplier costs, this has meant that the margins made by the supplies are far less than before, and can tip the supplier into administration. This coupled with the long payment terms of the supermarkets means that the suppliers have a cashflow problem, and end up running out of cash.

Are we due to see the effects of this in the wholesale market? At the moment, there may not be a price war waging between the wholesalers, but the food suppliers also supply to wholesalers and food service companies too. Thus, with fewer suppliers in the market and less competition, this may lead to higher prices in the future too.

It will be interesting to see how prices will be affected in 2015 with fewer food suppliers, and the impact of the discounters moving into the convenience store sector too. 2015 will certainly be an interesting year in the wholesale market!

Both Aldi and Lidl have announced that they will be opening up convenience stores to compete with Tesco Metro and Sainsbury Local which is big news in the convenience store market.

Aldi trialled their first store in Kilburn which has proved to be a great success, and Lidl is to follow with a store in Kentish town. The convenience store market has been one of the few growth areas for the supermarkets, with all keen to continue expansion too.

However, this could come to a pre-mature end with the emergence of the discounters into this market space. How will this affect the current crop of independents and retail outlets already there, and in turn affect the larger wholesalers too?

With the emergence of cheaper goods from Aldi and Lidl in a convenient format, this will have an impact on the current crop of Sainsbury and Tesco convenience stores, as well as all other independents. Customers are going for convenience and a cheaper price, and hence the new Lidl and Aldi stores will experience more customers which will be taken at the expense of the existing independents and supermarket chains.

As the independents buy their goods at the large wholesalers e.g. Bestway and Booker then the sales of these wholesalers could drop too, as they are dependent on the convenience store trade. Those wholesalers who have a large food service offering will see less of an impact than those who rely on convenience stores.

It’s interesting times for the retail and wholesale market and there could be some major changes happening over the next ten years in this market place.

As you must know by now, Tesco had a disastrous week recently, reporting a £250m profit error and seeing its sales crashing to 11 year lows. How such a big retailer could have got into such a mess, and is this a time bomb waiting to explode for other retailers, and indeed wholesalers too?

To see how this loss came about, we need to understand where this profit adjustment came from.

In most retailers and wholesalers, the big manufacturers e.g. Kellogg’s, Coke, Gillette pay them to help fund promotions to shift their goods. In this way they may contribute to advertising campaigns, special displays, or when items are discounted e.g. from £1.99 to £1.49. Here the suppliers typically pay the difference.

Most of this is linked to performance, so the rebate may be paid for the number sold. e.g. a penny in the pound for every 100 items sold.

Tesco had to estimate how much rebate it would receive from suppliers by forecasting sales. If this was too high, then the rebates are more than collected and the profit is overstated.

This rebate system also is prevalent with the wholesalers, and so if this could happen in the largest supermarket, can it also happen within the largest wholesalers too?

The answer would depend on how they book these rebates in their accounts, and how good the Finance Director is at his job. Tesco was in an awkward position as it didn’t have a Finance Director since April, and so this is where the error has occurred as nobody was taking control of the situation. Now may be a good time for all existing wholesalers and supermarkets to review their accounting practices in regard to the rebates received from manufacturers.

It was a big day for the UK on Friday morning, with the results of the Scottish Referendum. With Scotland voting ‘No’ on leaving the UK, it was one of the biggest days in the last 300 years in the history of the United Kingdom, and not to be repeated for a long time too!

So how does this affect wholesales prices of your food and drink items, I hear you ask? Well, we can look at it both in terms of a ‘Yes’ and ‘No’ to Scottish Independence and see what the affect’s on the wholesale prices would have been.

Today, all trade freely moves between England and Scotland in the UK. The big wholesalers have their headquarters in England, and run their Scottish stores usually as a subsidiary of their UK branch and so the stores are just treated exactly the same as the English stores with the same products, similar prices and the same distribution network.

However, if Scotland had decided to go independent, there would be a new border created between England and Scotland, with a new currency too, as the pound most likely would not have been allowed to continue as a currency in Scotland. This would have had a large implication on the prices charged to customers and the transfer of goods between the two countries.

Prices would be open to a foreign exchange rate, and we forecast that prices would have increased in relation to those in the UK, with the exchange rate fluctuating with the new independent status of the country. Additionally, transferring stocks to the ‘new Scotland’ would have incurred further charges with import duties going up, especially for Tobacco and Alcohol as the ‘new Scotland’ tries to raise funds to support their new independent country.

Additionally, the cost of distribution may be affected too. As Scotland is a separate country, they would be able to choose which taxes to apply to petrol prices in the country, making distribution to stores more expensive if petrol prices were to rise with the higher taxes.

All in all, it was a beneficial result for all wholesale businesses up and down the country that Scotland did not vote ‘Yes’ to independence and with this uncertainty removed, small businesses can now get back to working on improving their own sales, profitability and growth – the real issues that they face today, rather an issues brought about through decisions outside of their control.

After many months of research, programming and data gathering, we launched the Improve That Price Analytics online reports. The report provides users with live data on the Foodservice Wholesale and Cash & Cary market. These reports can be viewed by category, brand or type. The data can also be filtered to show only the Price Marked, Promotions or the Multi-buys. The site also features the price history of products, is very user friendly and you can have a two weeks free trial at improvethatprice.com/analytics. For further information email Faisal on faisal@improvethatprice.com.